Low investment in R&D and technology holding back business

Low investment in R&D and technology holding back NZ business

16 October 2015

Low investment in R&D and technology as a percentage of GDP is holding back New Zealand’s potential for dynamic business growth, according to the latest Grant Thornton Global Dynamism Index (GDI) 2015.

The GDI, developed in conjunction with the Economist Intelligence Unit, ranks 60 of the world's largest economies on dynamism, which indicates changes in an economy that are likely to lead to a faster future rate of growth.

Grant Thornton New Zealand partner, Michael Worth says our lack of investment in R&D, coupled with the poor way we make use of advancements in science and technology, shows there is still a lot of room for improvement.

“The index shows that New Zealand has a great platform from which businesses can grow, but we must stop thinking short-term and look to invest in the future,” he said.

New Zealand is ranked 28th in the world for its R&D spend as a percentage of GDP, well behind sector leaders South Korea, Israel, Finland, Sweden and Japan.

“We also continue to underinvest in science and technology. The index shows we only rank 30th in growth in broadband subscriber lines which means we’ve dropped 10 places since 2013; and we’re 54th in total IT spending growth – this means we’ve dropped 37 places in two years which is just staggering.

“That two year gap is a lifetime in the IT world; there is a clear and present danger that New Zealand will get so far behind, we may never catch up.

“Rather than investing in technology to make the ship go faster, historically many New Zealand businesses preferred to throw people at the problem. While current business confidence is OK, there’s not large growth in employment indicating firms have stopped doing even that. As a result, we are rapidly going backwards in world rankings”.

The survey ranked countries on 22 indicators of dynamism across five categories including business operating environment, science and technology, labour and human capital, financing environment and economics and growth. Singapore took out the top spot with 69.9, followed by Israel 67.5 and Australia and Finland both with a score of 67.3.

The areas noted in the index where New Zealand is strong include:
· Foreign trade and exchange regimes and controls
· Policy towards private enterprise and competition
· Political stability
· Legal and regulatory risk
· Unemployment
· School life expectancy
· Quality of overall financial regulatory system
· Access of firms to medium-term capital
· Corporate tax burden

Worth says that these strengths are well known and have been previously lauded. Successive governments have done their bit with policy settings to create a great platform for dynamism.

“The question our latest Global Dynamism Index forces us to ask is: have we created a dynamic economic platform in this country that other nations are benefitting from rather than us?” says Worth.

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